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COVID-19 Australia: The importance of addressing modern slavery in reviewing your supply chains

  • Market Insight 30 April 2020 30 April 2020
  • Asia Pacific

  • Coronavirus

COVID-19 Australia: The importance of addressing modern slavery in reviewing your supply chains

COVID-19 has already had a monumental effect on supply chains around the world and it is expected that over the next six months many companies will be undertaking major reviews of their supplier relationships.

In the course of assessing supply chains and supplier relationships, Australian companies should make sure that they take account of modern slavery risks. This is even more important given the projected economic environment ahead and the modern slavery reporting framework that now applies at the Commonwealth level.

Impact of COVID-19 on the Commonwealth modern slavery regime

The Commonwealth Modern Slavery Act 2018 (Cth) commenced on 1 January 2019.  An entity based, or operating in Australia with an annual consolidated revenue of over A$100 million is now required to report annually on:

  • the risk of modern slavery in their operations and supply chain;
  • actions they taken to assess and address those risks; and
  • the effectiveness of such actions.

Modern slavery refers to a range of forms of exploitation including forced labour, debt bondage, human trafficking and slavery.

Extended reporting periods

Under the Modern Slavery Act a modern slavery statement must be submitted within six months after the end of the reporting entity's financial year.  

In light of COVID-19, the Department of Home Affairs has announced an extension of the original deadlines. The new reporting deadlines are set out below:

Reporting Period

Original deadline for submission of Modern Slavery Statement

New deadline for submission of Modern Slavery Statement

1 April 2019 – 31 March 2020 (Foreign Financial Year)

30 September 2020 31 December 2020

1 July 2019 – 30 July 2020 (Australian Financial Year)

31 December 2020 31 March 2021
Reporting periods after 30 June 2020

The six month deadline for reporting periods ending after 30 June 2020 remains unchanged.

Mandatory criteria for modern slavery statements

The following mandatory criteria must be addressed in a modern slavery statement provided for the purpose of complying with the Commonwealth Modern Slavery Act:

  • Identification of the reporting entity;
  • Description of the structure, operations and supply chains of the reporting entity;
  • Description of the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls;
  • The actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
  • Description as to how the reporting entity assess the effectiveness of such actions;
  • Description of the process of consultation; and
  • Any other relevant information.

The Department of Home Affairs issued Guidance for Reporting Entities in October 2019.  This Guidance highlighted that although the modern slavery reporting regime is a continuous improvement regime, in order to prepare a meaningful modern slavery statement, a risk-based assessment will be necessary both in respect of an organisation's direct suppliers and potentially across its entire supply chain.

Additional guidance for entities impacted by COVID-19

The Department of Home Affairs has issued additional guidance for organisations about how to reduce the risk of vulnerable workers in their operations and supply chains becoming exposed to modern slavery as a result of COVID-19.

The key steps that are highlighted include:

  • maintaining supplier relationships and fostering open communication with suppliers about COVID-19 risks;
  • collaborating with suppliers, workers, business peers, investors, civil society and peak bodies to identify best-practice approaches to protect and support vulnerable workers; and
  • reviewing key international resources.

Update on the NSW Modern Slavery legislation

In 2018, New South Wales passed its own Modern Slavery Act. It was intended to commence on a day to be appointed by proclamation. However, following the passage of the Commonwealth legislation, concerns were raised about the constitutional validity of the NSW legislation and, as a result, no date was proclaimed for commencement. Instead, the legislation was referred to the NSW Parliament Legislative Council Standing Committee on Social Issues (the LC Committee) for inquiry.

On 25 March 2020, the Final Report from the LC Committee was published. While the LC Committee came to the view that it would be preferable to have a uniform and comprehensive modern slavery legislation framework, it ultimately supported the retention of the NSW Act.  As part of its 17 recommendations, the LC Committee recommended that the NSW Parliament proceed to introduce amendments to the NSW Modern Slavery Act with a view to it commencing on or before 1 January 2021.

If it enters into force, the NSW legislation will apply to those organisations which:

  • have employees in New South Wales;
  • supply goods and services for profit or gain; and
  • have a total turnover in a financial year of not less than $50 million.

As the financial threshold is lower for reporting in NSW it is anticipated that a further 1,650 entities will be picked up by this regime. The NSW modern slavery regime will also see the imposition of penalties (up to $1.1 million) against those commercial organisations that fail to meet their reporting requirements or that provide false or misleading information.

The NSW Government is yet to respond to the report but there is a high likelihood that the Modern Slavery Act 2018 (NSW) will be amended and subsequently adopted. We will continue to monitor developments.

Next steps

We expect that many organisations that are required to report under the Commonwealth modern slavery regime will be well advanced in undertaking supply chain mapping, and risk- assessments of their operations and supply chains in preparation for the reporting deadlines. Many organisations will already be familiar with modern slavery risk reporting under the United Kingdom's Modern Slavery Act and therefore, will have a head start.

We are encouraging companies to factor in the potential aftershocks of COVID-19 into your modern slavery processes given that the unfolding economic environment may significantly increase modern slavery risks in your supply chain.

Additional issues your company may want to consider include:

  • Will your organisation be changing its suppliers and if so, have you undertaken a risk assessment for the modern slavery practices of any new supplier?
  • Are your suppliers maintaining working conditions and managing modern slavery risks in the context of the health risks posed by COVID-19 and heightened economic pressure?
  • Have you considered new risks that may emerge for workers in your supply chain in a post-COVID-19 economy especially where workers may be working remotely or in offshore centres?
  • Do you still have sufficient oversight of modern slavery risks in your supply chain given that you cannot undertake physical audits?
  • Are there steps that your organisation can take under its contractual arrangements with suppliers to support vulnerable workers?

If you have any questions as to the best-practice approach for assessing modern slavery risks in the COVID-19 environment or if you require assistance to prepare your modern slavery statement please contact:

Avryl Lattin
Partner
M: +61 4 2364 9309
E: Avryl.Lattin@clydeco.com
Jacob Smit
Senior Associate
M: +61 4 3899 5013
E: Jacob.Smit@clydeco.com

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